Early pilots were in a tough position needing to depend on their senses to guide their planes in for landing. Edwin Link created the Link Trainer in the 1930s (Blue box) which became the first flight simulator helping pilots practice relying on their instruments. This came in very handy during challenging weather/heavy fog and pilot death drastically reduced. Sometimes picking a good investment can be metaphorically analogous to landing a plane: step away from your senses dealing with noise/emotion and simply rely on technicals/data. Use your instruments at hand, so to speak.
Jounce Therapeutics (JNCE) is just such a company for checking a number of those boxes that make a quality investment. They are a clinical-stage immunotherapy company based in Cambridge. A fast glance at Glassdoor.com to see what the employees think reveals that 95% of respondents would recommend working there to a friend and 97% approve of the CEO. This is pretty much as good as it gets for worker morale, job satisfaction and leadership vote-of-confidence. Jounce is still a small cap stock at $463M, which means there is plenty of room for growth either organically or from a buyout (Gilead already has invested through a licensing agreement for one of its programs). Even more compelling is the share float (the number of shares available to buy) is very small at 18M. This lower share count situation creates a likelihood of buying pressure setting in and driving the stock price north with a news catalyst. A look at the Investor’s Business Daily app reveals that Jounce has an impressive Relative Strength Rating of 89, a SMR Rating of B, zero debt, 44% management ownership (this is huge) and a whopping 38.45% profit margin.
And then for the savvy investor who wants to check technical charts, the Chaikin Money Flow is king for tracking recent momentum of accumulation (buying) or distribution (selling) and can be viewed on Barchart. The CMF is a volume weighted average (meaning it is influenced by increasing daily volume of trading, suggesting more interest) and also factors if the stock price ends near its daily high by close of market. The CMF is a 14 day trailing indicator and any day where its number is above zero means there is accumulation going on. Continuous positive numbers above zero is a great sign, and when it reaches the teens and twenties it normally means something is brewing. When it hovers in the 30s (and occasionally 40s) it reveals heavy accumulation is going on and something big could be about to happen (as insiders and institutions are loading up). Pair this with the Relative Strength Index (RSI) technical chart; when there is a divergence (CMF remains up and RSI is heading down) ensuing stock price action is imminent. Since January 15 the CMF for Jounce went positive and hit a blistering peak of 47 on Jan 25th. And it has remained in the 40s and high 30s since then. I may not have any medical industry experience, or insider information regarding Jounce, but my investor Link Trainer is pinging loudly that it’s time to buy.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” Warren Buffet